haporting apparel maker Under Armour reported better than expected third quarter earnings on international sales before the market open Tuesday. $UAA shares soared over 20% pre-market on the beat and raised guidance.
Sporting apparel maker Under Armour reported better than expected third quarter earnings on international sales before the market open Tuesday. $UAA shares soared over 20% pre-market on the beat and raised guidance.
The Heel of Project Rock 1 Shoe
Under Armour Inc Class A NYSE: UAA Reported Earnings Before Open Tuesday
$0.17 Beat Exp $0.13 EPS AND $1.44 Billion Beat $1.41 Billion Revenue Forecast
Earnings
Under Armour Inc. (NYSE: UAA) reported third-quarter results before the open Tuesday with net income, on an adjusted basis at $112 million or $0.25 per share beating analysts’ forecast. Reported profit was $75.3 million or $0.17 per share, up from $54.2 million or $0.12 per share a year earlier. Revenues rose 2.4% to $1.44 billion helped by a 15% growth in international sales that more than offset a 2% decline in the North American market. The analysts consensus EPS estimate was $0.13 on $1.41 billion in revenue. Shares have a 52-week trading range of $10.36 to $22.68.
Investors were pleased to hear the update on Under Armour’s brand development and expansion of DTC with technology-based fitness businesses. $UAA has been trying to boost its DTC business through store expansion initiatives and enhancement of its e-commerce platform over the past few years. We have seen more presence in Canada and Asia.
Under Armour Inc Class A NYSE: UAA
Market Reaction Pre-market 21.49 +3.30 (+18.14%)
Highlights
- 15% growth in international sales
- 2% decline in the North American market.
- Wholesale revenue advanced 4%,
- Direct-to-consumer revenue remained broadly unchanged year-over-year.
- Footwear and accessories remained sluggish
- Apparel revenue rose 4%.
- The company incurred pre-tax costs of $154 million during the quarter in connecting with its ongoing restructuring program and expects about $200-$220 million in restructuring and related charges for the remainder of the year.
“As we work through this chapter, we are staying sharply focused on our brand by connecting even more deeply with our consumers while delivering industry-leading, innovative products and premium experiences,” said CEO Kevin Plank.
Outlook
- In the whole of 2018, revenues are expected to grow between 3% and 4%, which reflects a low single-digit decline in North America and a 25% growth in the overseas market. Apparel is seen growing at mid-single-digits in 2018, footwear at a low single-digit and accessories at a mid-single-digit rate. Inventory is forecast to be flat to slightly down at the end of the year.
- The company revised up its full-year adjusted earnings guidance to the range of $0.19 per share to $0.22 per share from the previous outlook of $0.16-$0.19 per share.
Under Armour Project Rock
The Rock’s Under Armour Project Rock 1 shoes were released on May 28 in limited quantities through the company’s online store and in Brand Houses across the country over Memorial Day with a red, white and blue color scheme in honor of America’s service men and women, .
The whole inventory sold out in 30 minutes.
“We like to think of Dwayne as our motivator of the masses,” said Adrienne Lofton, senior vice president of global brand management at Under Armour.
The shoes were priced at $120, with features like heel support for stability while lifting weights, as well as a top knit for a snug fit around the ankle and foot. Under Armour will restock the shoes on June 28, which will be the global launch. Further details are yet to be announced. The Rock has been in partnership with $UAA since 2016 with the first joint projects a backpack and duffel bag.
In addition to The Rock’s new shoe, Under Armour also introduced a new Steph Curry basketball shoe on Pi Day, March 14. The latest version was priced at $130 and sold out online. Curry’s team Golden State Warriors is up 3-0 in the NBA world championships so a further flow on affect is seen there.
Outside of Lululemon apparel retailers have been burdened by high inventory levels which puts pressure on margins. The popularity of the Project Rock 1 could be a sign of improvements a number of analysts have said, though sceptics see the analysts searching for a trade after missing $LULU.
Instinet Analysts noted “We believe that the limited availability (and subsequent restocking) is part of the company’s plan for managing the franchise to generate buzz and promote a ‘call to action’ and represents a positive for brand equity,”
Stifel analysts said “We are particularly encouraged by opportunities for gross margin improvement from both elimination of the liquidation burden and improved sourcing (SKU [stock keeping unit] rationalization, materials planning, factory consolidation, capacity planning, etc.),” Stifel raised their price target $UAA shares to $27 from $20 and rates Under Armour shares a buy.
Source: Under Armour